Global mining in a 'crisis of confidence' as debt soars, profits plunge

Analysis of the 40 top global mining companies has found profit levels plunged more than 70 per cent to $20 billion for 2013.

Business consultant PriceWaterhouseCoopers says the industry is suffering a crisis of confidence, although the asset base of these companies grew seven per cent last year.

The market value of the top 40 dropped 23 per cent, equal to $280 billion, with iron ore miner FMG one of only four four companies to see an increase, to $958.

Gold miners led the retreat, shedding $110 billion in market value, which is 40 per cent of the total value drop.

It's the second year in a row the PriceWaterhouseCoopers report into the top 40 global miners has made for grim reading.

PwC Australia's energy, utilities and mining leader, Jock O'Callaghan, says the pace of change is unprecedented and while many hope the industry hs reached rock bottom, it's too hard to call whether conditions are poised to improve or will continue to bounce along the bottom.

Mr O'Callaghan says there were complex issues at play in the massive drop, but one of the reasons is that investors are demanding a return on their capital rather than see profits reinvested in the company.

He says the problem is those dividends have now become one-third of the cash flow to keep the mines operating.

"These dividends are effectively being paid out of the retained earnings, the historical build-up of profits.

"There hasn't been enough in the current year and what they're drawing upon is their successes in the past to keep investors happy, satisfy their increased expectations around returns.